Ask HN: What justifies 30% of sales by app stores?

[funwie]

Where do you stand on this idea of sales percentages to App Store? Is it justifiable?

App stores (iOS App Store, Google Play Store, Microsoft store) charge a percentage of sales made through the stores.

Which services do these stores offer that warrant them to receive up to 30% of sales.

An app in any app store already has 30% off it’s revenue. That is a huge amount. For some businesses, that is profits.

I assume business have to pass this 30% to someone else before they can make a profit. Guess who that someone is? Consumers

[kjksf]

"is it justifiable" is an irrelevant question.

Apple charges 30% because they can. They can because software companies have demonstrated they are willing to pay that 30%.

Apple holds all the cards so they have pricing power.

Contrary to your claim, this doesn't increase the price by 30% because the price is not determined by the software company but by customers' willingness to pay.

Price of software on iPhones is impossibly low. That's because for every piece of software, there's a lot of competitors providing such software and ecosystem evolved toward incredibly low prices.

That's also why making make mobile software is a terrible business for most.

[gpresot]

They can charge these fees because they are the ones controlling the access to final consumers. They have reached this control by spending billions in building their platform (or even developing the smartphone in the first place) and by keeping the platform secure and simple to use.

For many brick & mortar retail segments, fees can be much higher than 30%. Supermarkets can charge easily 50% of final price as fee (i.e. they buy the product from manufacturer at 50% of final price), and for some categories in some countries it can be much higher still. This then pays for their operations (warehousing, inventory, labour, rent of spaces in attractive areas...).

Yes, consumers pay this fee ultimately, but they are happy to do so in exchange of elimination of the search friction (a vast choice available under one roof). In fact today we have largely moved away from going to the baker for bread, then butcher for meat, the local market for veggies, the hardware store for nails etc. Even dedicated stores (like clothing stores on the High Street) offer choice of sizes, opportunity to try the garments on etc.) and are in areas of high foot traffic that enable searching for the right product by browsing in nearby stores. Ultimately, though, retail remains a low margin (in % terms) business, a proof that those fees are not that absurd.

[throwawaymsft]

> What justifies 30% of sales by app stores?

Supply and demand. If you think you could sell 70% as much outside the store then go for it. How much do you think Amazon, Best Buy, Walmart and Target mark up their inventory?

[pritambarhate]

One important thing we tend to forget is that Apple and Google provide all the tooling for iOS and Android for free. Developing the core OS, core programs and development tools has required probably billions of dollars of investment.

As a programmer distributing on these platforms you get all of the above for free in addition to billions of existing users. That's the reason I think 30% is justified.

[mailslot]

I hate paying it... but let’s be honest. Before app stores and the hardware & phone OS’s they run, mobile apps weren’t a thing.

The justification is the distribution, curation, promotion, updates, support, etc. The massive infrastructure needed to deliver the latest & greatest mobile tech, the APIs that let developers take advantage of it, native payment processing, tax reporting, etc.

You don’t even need an LLC to go into business for yourself. That’s huge and worth 30% IMHO.

[rahimnathwani]

30% gross margin is on the low side for software distribution. Google 'gamestop gross margin' for one benchmark (~35%).

Most people would be surprised at the retail margins for many products (e.g. insurance) and don't realise how much bargaining power those that own the customer relationship (Walmart, Amazon, Booking.com, DoorDash etc.) have.

[gesman]

If you have relationship with powerful software reseller that can boost your sales 50-200% - they can charge 50% and in some cases up to 75%.

It's not unheard of for young software companies to give 100% of software sales to powerful partner to immediately boost visibility and brand awareness.

[joezydeco]

Which services do these stores offer that warrant them to receive up to 30% of sales.

They deliver tens of millions of customers with pre-verified payment methods, ready to purchase.

[ignoramceisblis]

Because people agree to it.

There are a lot of new and ignorant programmers now, more than there ever were. They will agree to terms that are "not balanced in their favour." Programming is being commoditized by a limited number of managers and the like. This is the result. They reap the largest profits. Look for yourself.

[dchuk]

>>> Which services do these stores offer that warrant them to receive up to 30% of sales.

Tooling? Network effects? Security? Distribution?

[oldmancoyote]

Someone might argue that Apple is buying wholesale and selling retail where the standard markup is 33%. It's not my issue. Just an observation.

[wmf]

Discovery (search, recommendations, and top 10 lists).

It would be interesting if apps could opt out of being discoverable to get lower fees.

[db48x]

All distributors take a percentage of the sales. In fact, physical distributors probably have even better terms.

[moonbug]

The simple fact that they have a monopoly on access.